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The Why & How of Happy Investment Partners

Andrew C. MacDonald
2 min read
The Why & How of Happy Investment Partners

At some point in our real estate investing career, most of us have trouble coming up with additional funds to continue acquiring properties. Whether this happens after your first property or your tenth, one of the most common ways to continue buying property is to begin working with partners. After using your own resources to build a track record and gain some experience, you can start asking others to invest with you. If you want to continue working with partners in the future, it is crucial that you always take good care of your investors from day one.

3 Reasons to Keep Your Partners Happy

Aside from the fact that you should strive to honor your word and conduct your business with integrity, here are 3 great reasons you’ll want to keep your real estate partners happy:

  1. They’ll do more deals with you in the future
  2. They’ll provide you with referrals
  3. They’ll be the reference for your next partner

3 Rules for Keeping Your Partners Happy

When it comes to pleasing your investors, it is important to manage expectations. All you really need to do is follow the concept of under promise, over deliver, but here are 3 ways to make sure that’s the case:

1. Don’t Make Promises You Can’t Keep

The easiest way to under promise and over deliver is to avoid making promises you can’t keep. Don’t guarantee cash flows, investment performance or anything else you can’t control. It is better to have someone turn down your deal than to get involved under false pretenses or high expectations.

2. Highlight the Dirt

Every deal has its pros and cons, and you’ll be far better off if you shine a spotlight on any negatives upfront. Make sure your partners understand the deal, the downside risks, and the worst case scenario before they get involved. Being completely transparent with the pros and cons of your deal will help you gain their trust and respect. Show them you have nothing to hide and you’ll both sleep better at night.

3. Be Conservative

When marketing your deal it’s easy to be a little aggressive with your numbers to make the return metrics more attractive. Bumping up your appreciation rates, lowering your vacancy rates, or expecting interest rates to stay flat will all boost your bottom line, but overly optimistic projections will only lead to trouble down the road. Even if your investment ends up yielding a healthy 30% per year, the investor expecting a return of 50% per year is going to be disappointed. Staying conservative in your projections will let you deliver positive news on a regular basis.

Your Reputation is at Stake

“It takes twenty years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” – Warren Buffett

Happy investment partners will unlock your success, so remember to under promise and over deliver to keep them happy. Deal with integrity in all of your business activities and your reputation will precede you.

Creative Commons License photo credit: katerha

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.